Judge Approves Sunbeam's Plan

New York — Sunbeam Corp.'s recovery plan was approved by a federal bankruptcy judge, after bondholders dropped their objections, clearing the way for the small-appliance maker to emerge from Chapter 11 reorganization.

U.S. Bankruptcy Judge Arthur Gonzalez approved Sunbeam's plan to give secured lenders almost all the shares of the company and leave bondholders who were owed more than $862 million with a tiny fraction of their original investment.

Lenders, led by Morgan Stanley & Co., Wachovia Corp. and Bank of America Corp., will get shares worth one-third of the more than $1.6 billion they are owed. Bondholders, who had fought the plan, will get 1.5 percent of the stock in the new company. Current shareholders of the Boca Raton-based company get nothing.

The Justice Department is investigating Sunbeam's finances from 1996 through 1998, while Al Dunlap was chief executive and Russell A. Kersh was chief financial officer, according to the recovery plan. In September, Dunlap agreed to pay $500,000 to settle Securities and Exchange Commission charges that he cheated investors by inflating sales figures. Kersh agreed to pay $200,000.

In the recovery plan, Sunbeam said it may bring lawsuits against Dunlap and Kersh seeking to recover "several hundred million dollars" in damages. Proceeds from the lawsuits would be used to help repay creditors, Sunbeam said.